March 28, 2023
What's happening in Silicon Valley now that its eponymous bank is no more and equity capital for venture deals is tight? This is the question anyone interested in the BDC venture-debt segment, with its 5 public players, must be asking themselves. We've just identified one story which sheds a little light but is way too early to generalize from Good Eggs, Inc. - a venture-backed organic food delivery service - has just raised "around $7 million from Greenwich, Conn., investment firm Glade Brook Capital Partners at a pre-investment valuation of $15 million, said two people with knowledge of the deal". This is according to The Information, a technology industry publication.
There are three related BDCs with just short of $20mn of exposure to the company, mostly in the form of two Term Loans due in May and August 2025. The BDCs are all managed by TriplePoint Capital - "the global leader in venture finance". One of the BDCs is the publicly traded TriplePoint Venture Growth BDC (TPVG), which has two-thirds of the capital advanced or $12.8mn at cost.
Good Eggs - according to our rating system - was added to the list of underperformers because the equity and preferred held by the TriplePoint lenders went from being valued at a premium to being almost written to zero in the IVQ 2022. Now it's almost certain that the $500,000 in junior capital held - $0.4mn which TPVG owns - is valueless, but the amounts are not material.
More important is what this news means for the TriplePoint debt outstanding. On one hand, the company's "runway" has been extended with this new equity raise. On the other hand, $7mn does not get you much extra "runway" these days. Unfortunately, we don't know what the economics of the business look like and how much of the $201mn raised over ten funding rounds remains on the books. For all we know, the company can motor on for years or be on the verge of closing - this $7mn notwithstanding. This could be good news or - in a roundabout way - bad news for the company's lenders.
We'll learn more from the TPVG IQ 2023 valuation and anything management decides to share with its analysts and shareholders in a few weeks. By the way, here is the Company File from our database.